I recently took a trip to another country with a friend. We agreed to share expenses. When they presented their list of expenses, they included a foreign transaction fee charged by the credit card they used.
Before we left for the trip, I researched my credit cards and used the one that did not charge a foreign transaction fee. We did not discuss anything about foreign transaction fees in advance.
I think they are responsible for the costs of using the card they choose to use. Do I owe them half of these charges? If so, I’ll take my lumps. If not, how can I explain that card fees are not a shared expense?
This is tricky. I’ll explain why.
On the one hand, charging you credit-card foreign-transaction fees is not so different from charging you for her late fees: Foreign-transaction fees appear on her credit-card bill, not on the restaurant bill. Like you, she has control over whether she pays them or not by choosing the appropriate credit card. If she withdrew money from an ATM, she would not charge you for those fees. On the other hand, they were — strictly speaking — incurred as part of the transaction.
These fees can cost anywhere from 1% of the purchase price to 5% at the high end, although most cards typically charge around 3%. For example, the credit-card company could charge 1% for a currency conversion fee, and the bank could charge a 2% interchange fee. Whether you pay at a restaurant or a retailer or withdraw money from an ATM, you will pay this fee. What’s more, if you choose to pay in, say, euros, you will likely get a worse rate than if you had paid in dollars.
Most cards that waive the foreign-transaction charges come with an annual fee, but also carry many perks, benefits and bonus points that help offset that fee. Some cards will give you thank-you points for using your card at a gas station, restaurant, hotel, or airline. To your point, you wouldn’t split an annual fee with your friend 50/50 just because you used that card on vacation, just as you wouldn’t share the thank-you points you incurred as part of your trip.
“You wouldn’t split an annual fee with your friend 50/50 just because you used that card on vacation, just as you wouldn’t share the thank-you points you incurred as part of your trip.”
But while it may seem like sharp practice by your friend to include this on your final bill, it does not mean you should abide by the strictest standards of etiquette. As with most things, it comes down to a balance between what is right, and what you can live with to keep the peace. That’s likely why some members of the Facebook Moneyist Group are divided. One person wrote in response to your letter: “How are you responsible for what credit card she chose to use?”
While another replied: “Is it going to break the bank? Why not just pay and take the opportunity to offer a little education such as, ‘Hey, I found out my X card doesn’t charge a foreign transaction fee, but my Y card would have. If you have more than one card, check it out, as it might be a way for you to avoid these fees on the next trip.” I believe that is fair and transparent: You’re putting your friend on notice for the next trip, but you are also taking the higher ground.
Ultimately, it all depends on the amount of foreign-transaction fees, and the nature of your friendship. If this is a friend who nickels and dimes you at every turn, and is a nitpicker from Paris to Pittsburgh, this could be an opportunity to finally cut your losses and tell her you have had enough of her transactional nature. If, however, you are good friends and the fees amount to $100, you may decide that it’s worth paying your $50 share as the price of your friendship is worth a lot more.
If you decide to pay, alert her to the alternative cards, and politely let her know that you won’t pay for her foreign-transaction fees again.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.